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Here is a question to the blog clinic from Liz who is a landlord:

I am a rookie landlord and learning the ropes. I am letting out my property and have found some private tenants. They wish to pay 6 months upfront rather than having a guarantor. Are we secure as landlords? Is there any way in law that they could ask for a proportion of the advance rent back? Many thanks.

Answer

So far as asking for the money back, technically I suppose your tenants could do this if the tenancy ended early.  But they cannot unilaterally require the tenancy to end early – you would have to agree to this.  So long as your fixed term is for at least six months, you cannot be forced to agree to an early surrender (save in exceptional circumstances, perhaps if the building burned down).  So in reality there are unlikely to be circumstances where you would have to pay the money back.

However, the trouble about six months rent in advance is that it only protects you for those six months.  

Most tenants stay longer than this.  It is not unknown for a tenant to pay the initial six months rent in advance to get the property (or sometimes this is paid for them by a relative) but then fail to pay anything else.  You then have the problem of dealing with a tenant in arrears of rent.

The important thing with all tenants is to reference them really, really carefully.  For example, you need to ask for bank statements for the past 3 months to make sure they can afford your rent and get a credit report done.  In view of the fact that it can take many months to evict a non-paying or bad tenant, it is really important that you do this thoroughly.

If you have reservations about someone I would prefer to see six months rent in advance AND a guarantor.  Or better still, rent to someone else who seems to be better able to afford the property and who CAN provide a guarantor!

Note that guarantors should also be carefully referenced and ideally should be someone who owns property in the UK. 

Some tenants, for example, overseas students, may struggle to find a guarantor.  However, there are companies who for a fee will provide a guarantee on a tenant’s behalf.  You can normally find them via search on the internet.

You should also be aware that often criminal tenants will offer to pay large sums of cash upfront on the basis that you will then not carry out many checks and will also leave them alone in the property.  Then once they are in they convert the property to a cannabis farm.  We have a post about this here.

SquareLLL3Logo 125 - Is it better when taking on a new tenant to ask for six months rent in advance or a guarantor?Note that we have detailed guidance for my Landlord Law members on referencing tenants linked from my Landlord Law site checklist, plus we have forms of guarantee that you can use.



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